Peters Company makes a product that regularly sells for $14.50 per unit. 0 (Clic

Question

Peters Company makes a product that regularly sells for $14.50 per unit. 0 (Click the icon to view additional information.) 7.If Peters Company has excess capacity, should it accept the offer from Wismer? Show your calculations. 8.Does your answer change if Peters Company is operating at capacity? Why or why not? 7. If Peters Company has excess capacity, should it accept the offer from Wismer? Show your calculations. (Use a minus sign or parentheses to show a decrease in operating income.) Expected increase in revenue Expected increase in variable manufacturing costs Expected increasel(decrease) in operating income More Info The product has variable manufacturing costs of $9.00 per unit and fixed manufacturing costs of $2.50 per unit (based on $180,000 total fixed costs at current production of 80,000 units). Therefore, total production cost is $11.50 per unit. Peters Company receives an offer from Wismer Company to purchase 4,400 units for $10.50 each. Selling and administrative costs and future sales will not be affected by the sale, and Peters does not expect any additional fixed costs. Print Done

Explanation / Answer

7 Expected increase in revenue 46200 =4400*10.5 Expected increase in variable manufacturing costs 39600 =4400*9 Expected increase(decrease) in operating income 6600 yes the offer should be accepted

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